3 ms·
> Stock prices are set by the profitability of the company. No, stock prices are driven by demand. The most dominant factor in determining demand might be pro
by peeters 7y ago
> Stock prices are set by the profitability of the company.
No, stock prices are driven by demand. The most dominant factor in determining demand might be profitability for some investors, but it's one of many (stability, risk, ethics are all other factors). Even saying profitability is the dominant factor for stock prices is dubious, since many unprofitable companies have outrageously high stock prices based on speculation of growth.
If demand dropped enough in spite of profitability, it would reduce the stock price.
- BurningFrog 7y ago> Even saying profitability is the dominant factor for stock prices is dubious Sure I simplified, and you're right that it's more the expected future profitability than the current one that's important. > If demand dropped enough in spite of profitability, it would reduce the stock price. Technically true, I guess, but pretty meaningless. To me that's a tautology, boiling down to that if the stock price falls then the stock price falls. I'm not sure you appreciate the armies of analysts who crunch the numbers for every possible investment, trying to spot under- or overvalued companies and make a profit on their deeper insight. Even if 95% or 99.9% of investors decline to invest in companies with the right numbers, there will always be a few who will gladly take the free money. Maybe that's the disconnect here. The "Divest People" think of this as a democracy where you have to sway the majority. But that's not at all how the markets work.